From Real To Surreal And Back Again

By the time they went bust,
Kozmo
and
Urbanfetch
, married first cousins in the Internet-and-deliver-it-craze, blew through more than $300 million in venture capital.

"It was like young kids playing business," says
Mike
Fiorito
Mike Fiorito
, a veteran owner of courier businesses who worked for Urbanfetch until its demise in October 2000. Now Fiorito has carved a new business from the wreckage.

Like Kozmo, its more famous competitor, Urbanfetch, promised to deliver snacks, videos or DVD players to a customers' doors in an hour. Kozmo, backed by Flatiron Partners, Starbucks
and Amazon.com
, hung around until April 2001. Both companies blamed the capital market's treason for their failures. Though losses mounted, profitability was around the corner, Urbanfetch Chief Executive
Ross
Stevens
Ross Stevens
insisted at the time.

But Fiorito says the view from the inside was different: "We're pretty realistic guys and we're sitting in meetings with these people talking about a billion dollar market cap. Believe me, we wanted to believe; we just didn't drink the Kool-Aid."

For Fiorito, his nine-month stint at Urbanfetch was a trip to the surreal. But when it was over, he picked up Urbanfetch's business-to-business courier operation, which he managed, combined them with his old courier company and revisited reality. Urbanfetch had, rather than go out of business, decided to "[redeploy] all of its business-to-consumer assets to its business-to-business enterprise." This meant, he was back in business as Urbanfetch Express. The company also does business as
Citysprint
.

Fiorito, 40, a native of Queens, started
Earlybird Courier
at age 18. By 1997, when he sold Earlybird to
Dispatch Management Services
, a Lake Success, N.Y.-based company that was buying up courier firms, Earlybird had sales of $18.8 million and delivery contracts with companies including Sony
, Young & Rubicam and Arthur Andersen.

After selling Earlybird, Fiorito worked for Dispatch Management until "philosophical" differences led to a parting of ways in 1999. Flush with a settlement, he took a few weeks off and, like everyone else in Manhattan, noticed the arrival of Kozmo and Urbanfetch, both of which were hiring many of the bicycle messengers he used to employ.

He sent an e-mail to the presidents of both companies. Within an hour he received e-mail in reply. Within 24 hours, he had job offers from both, Fiorito says.

The founders of both Urbanfetch and Kozmo came from finance backgrounds and had no experience running a courier service, which is not as simple as it seems and was even more complex the way these new economy firms wanted to do it. They badly needed someone like Fiorito with nuts-and-bolts experience.

When he arrived at Urbanfetch, Fiorito says, it cost the company $13 to make a delivery. With this cost coming off the top, there was no way to make a profit. Fiorito and his team whittled the delivery cost down to $6. But they were delivering groceries, videos and electronics--all of which are notoriously low-margin products--and not charging a delivery fee, so even $6 was too high. With marketing and other expenses, the company remained nowhere near viable, even after it instituted a minimum order policy. But it was at least on a less quixotic track.

Early on, Fiorito convinced the Urbanfetch bosses to start a business courier service. This business could actually bring in cash while waiting for the consumer Internet business to deliver its magic, or at least an IPO (which, of course, never happened). Kozmo scoffed at this prosaic notion. But Urbanfetch agreed, which later gave the company something of a life beyond the bubble.

At around the same time Urbanfetch abandoned its popcorn-and-Tootsie-Rolls-to-the-doorstep strategy, Dispatch Services was faltering in its rollup dreams. Fiorito was able to buy back the company he sold at a fraction of the price. He was also given control of Urbanfetch's profitable courier business. He has changed the name to
Urban Express
and will split the equity in it with Urbanfetch shareholders.

Urban Express, as it is now known, employs 400 bicycle messengers, as well as foot messengers, dispatchers and salesmen, as well as truck drivers--who are independent contractors. All told, it has 800 workers and delivers 7,000 packages daily. Fiorito says the combined company has sales of $30 million and is profitable. The company uses two-way radios to keep in touch with the messengers.

Because the company is one of just a handful to do what's necessary in terms of bonding and insurance to compete for large corporate accounts, Fiorito can pay his messengers a living wage.

Hard charging bike messengers, Fiorito says, can earn up to $40,000 per year in commission, plus benefits. He makes a point of training his workers properly and insists they wear uniforms, which, he says, leads to them being treated more respectfully by customers. Still, most last just a couple of years.

Now that he has returned to ground level, Fiorito has no handsome venture capitalists covering his losses. There are no investment bankers whispering sweet IPO nothings in his ear. In short, it's not as sexy.

But in business, real satisfaction can't always be had in under an hour.